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Little private demand for $9 billion in 10-year U.S. debt

Section: Daily Dispatches

1:24a ET Wednesday, September 8, 2004

Dear Friend of GATA and Gold:

A copy of London-based UBS gold analyst John
Reade's recent report suggesting that the European
central banks soon will be reducing their gold
sales, about which we were able to send you only
an unsatisfactorily brief dispatch the other day,
has been posted in full and in the clear on the
Internet here, at least for the time being:

http://www.sitedynamo.com/cwsv3/trial530369/MiscFiles/gold020904.pdf

If the report disappears from there, GATA has made
a copy of it for reposting on a server somewhere
in the Free World -- like China or India.

A few things of particular interest in Reade's
report:

* Reade writes: "The demonstration of the
quasi-currency nature of gold over the past five
years, together with the common view that the
large and widening U.S. current account deficit
may lead to further dollar weakness, may have
led Eurozone central bankers to reconsider, or
at least delay or reduce, their plans to sell
gold."

That is, even with gold's price up only about
6 percent over the last 12 months, this
supposedly dead asset has been more
profitable to hold than dollars, for which
only a substantially lower rate of return has
been available. Central bankers could do a lot
worse than to hold their foreign exchange
reserves in gold -- and, in fact, insofar as
they are holding dollars, which multiply like
digital rabbits, central bankers ARE doing a
lot worse.

* Reade writes: "That the gold price typically
fell more when a central bank gold sale was
announced than when it was (presumably)
transacted indicates that the idea of gold sales
had more impact than the actual physical supply."

That is, as GATA long has maintained, the central
bank gold sales of recent years were probably not
sales at all but mere bookkeeping entries,
allowing gold borrowers to purchase (no doubt at
a discount) the gold they had borrowed and
ALREADY sold into the market; and the publicity
around these "sales" was meant to scare the market
down when the transactions actually signified
gold's growing scarcity rather than its growing
abundance.

* Reade says he will hold to his prediction of
gold at $450 by the end of the year. That would
be a 12.5 percent gain in just four months.

Can the United States really debase the dollar
that fast? Actually, the dollar ALREADY has
been debased far more than that, the purpose
of gold leasing having been to cook the books
and postpone the realization.

* While Reade is writing in a very restrained
way, he is predicting central bank gold policy
on his own authority, making no attribution,
leaving us to understand that it is his business
to know.

Maybe; we'll see. But push past the high tone of
Reade's report and get down to details and the
guy may be almost another GATA nut -- except, of
course, with a much better tailor.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

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----------------------------------------------------

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----------------------------------------------------

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